GelTech Solutions, Inc. (GLTC) - Description of business
GelTech Solutions, Inc. ("GelTech" or the "Company") was organized on July 19, 2006 as a Florida corporation and was reincorporated on November 15, 2006 as a Delaware corporation. On July 20, 2006, GelTech issued Dyn-O-Mat, a related party affiliate, 7,250,000 shares of its common stock in exchange for all of Dyn-O-Mat's intellectual property except the unrelated "black mat business" and selected other assets and selected liabilities. GelTech was formed to act as a holding company for the intellectual property developed by Mr. Peter Cordani, our Chief Technology Officer and a director.
Our current business model is focused on the following polymer-based products:
·FireIce® - a fire suppression product,
·RootGel TM- a line of agricultural moisture retention products,
·IceWearTM - a garment line to assist in cooling body temperature, and
·WeatherTech Innovations® - our hurricane suppression project.
Fire suppression is approximately a $2 billion a year industry according to a 2003 National Aeronautics and Space Administration press release. According to an article published by the Building and Fire Research Laboratory of the National Institute of Standards and Technology, as early as 1994 the lack of availability of halon fire suppressants sparked worldwide efforts in developing alternative firefighting agents and delivery systems.
The business has two marketing thrusts:
·suppression of structural and other fires within cities and towns, and
·suppression of wildland fires such as forest fires managed by federal and state governments.
According to the National Fire Protection Association in 2007 there were 1,642,500 fires in the United States that caused approximately $14.6 billion in damages. In 2007 there were 28,004 structural fires in New York City alone. The New York City Fire Department or FDNY, the largest fire department in the world, had a 2007 budget of $1.4 billion. Of this amount $322.2 million, a 79% increase from 2006, is earmarked for the procurement of additional mandated front line firefighting apparatus and ambulance fleet maintenance. In 2007, federal agencies spent approximately $1.86 billion on the suppression of wildland fires. In addition, Homeland Security through their Assistance to Firefighters Grant has distributed funds to allow firefighting departments to purchase critical firefighting gear equipment and other fire suppression necessities. According to the Department of Homeland Security's website, Homeland Security will award approximately $492.3 million under the Assistance to Firefighters Grant in Fiscal Year 2007.
FireIce® is the registered trade name of our fire suppression product. FireIce® is a dry powder that when added to water in very low concentrations (0.1 to 1.2 percent by weight), rapidly absorbs water to produce a gel whose consistency depends on the selected concentration. The dry powder is self dispersing in many applications, or can be easily mixed with water. Within seconds of being mixed with water, FireIce® is ready to use and turns into a fire preventing, heat absorbing and fire suppressing gel.
When mixed with FireIce®, water is held by a three-dimensional network of cross-linked polymers. When applied to the fire, the water evaporates and the gel collapses sapping the fire of not only heat but oxygen as well. In many applications the gel forms a cohesive layer which acts as a vapor barrier and prolongs the effectiveness of the water. Due to the gel layer created by FireIce® on burning and adjacent objects, FireIce® also has the ability to suffocate a fire.
FireIce® has the following properties. We believe it:
·is environmentally safe,
·is non-corrosive to metals,
·mixes easily with water,
·will not clog or stick in spraying devices,
·reduces the threat of a fire rekindling,
·extinguishes fires more rapidly than traditional methods, and
·saves customers cost on freight when compared to competitors.
There are many existing and potential uses for FireIce®. We believe it can be an extremely valuable tool for firefighters because:
When mixed with water, it can be dispersed and applied by all types of application equipment used in direct fire suppression, such as pressurized water extinguishers, pumper trucks, backpack sprayers, or even hand held spray bottles.
·Firefighters can apply FireIce® directly to buildings and other structures exposed to an advancing fire.
·FireIce® can also be rapidly sprayed on foliage to prevent the spread of fires.
·FireIce® absorbs many times its own weight in water and forms a gel producing increased droplet sizes that reduce drift and evaporation when dropped aerially.
In 2007, devastating Southern California wildfires were responsible for the deaths of 14 people, demolishing more than 2,000 homes and scorching more than 800 square miles between Los Angeles County and the Mexican border. According to a FoxNews.com article, the Florida and Georgia fires in 2007 burned hundreds of square miles of land and forced the evacuation of hundreds of homes. Additionally, the epidemic of fires recently damaged or destroyed thousands of homes in Idaho, South Dakota and Colorado. Fires are not only a major problem in the United States. In August 2007, fires ravaged approximately one-half of Greece killing at least 63 persons according to one report. The wildfires have continued to devastate California in 2008. Through mid-September, there have been over 67,000 wildfires burning over 4.7 million acres in California alone. FireIce® can play a major role in putting out and containing wildland fires, including forest fires, by being sprayed from airplanes directly over such fires, including in areas too dangerous for ground-based firefighters to enter. FireIce® can also be sprayed from tanker trucks on the edges of these fires.
FireIce® also has a number of potential retail and consumer uses:
·It can be pumped out of fire extinguishers.
·It can be used in a spray bottle by professionals, such as welders, who work with blowtorches.
·Though it has not yet been tested in this manner, we believe it could be sprayed from building sprinkler systems. We have companies that are interested in testing our product for this application.
Sales and Marketing
After we received independent third party laboratory certification (UL-711 2-A; UL-711 40-A, and a Custom Rubber and Tire Fire Listing), we began marketing FireIce® initially to local fire departments and local government officials.
We market and sell FireIce® through attendance at fire industry national trade shows and through our team of seven people who call on potential customers and respond to inquiries.
Because of the wildfires which threaten the West Coast of the United States each year, we are concentrating our marketing efforts there. Beginning in the early part of 2008, our senior management and other sales personnel have regularly visited the West Coast laying the ground work and creating relationships for a distribution network. We have entered into an exclusive agreement with Pacific Fire Guard to partner and handle the sales and distribution of FireIce in California and the West Coast. Our agreement in place gives us a California-based distributor to warehouse FireIce® and handle all logistics required to handle potential demand from West Coast firefighting organizations. We also currently have two lines of credit in place to handle both production of orders and operational expansions that may be needed.
Although with our UL-711 certifications, we can sell directly to fire departments around the United States, sales to Wildfire and Forestry Departments require that we appear on the United States Department of Forestry (the "Department") Qualified Products List ("QPL") and that we obtain Department approval within U.S. Department of Agriculture Forest Service Specification 5100-306a. We have applied to the Department, but because the approval can be lengthy, we cannot be certain when FireIce® will be approved.
We also intend to market FireIce® to the federal government. In this capacity, we have had recent meetings with a major defense contractor who is interested in incorporating FireIce® into products they sell to the United States military. Because of the lengthy product development and sales process, we are uncertain as to whether we will receive orders or, if we do, when we will receive them.
Raw Materials and Suppliers
The raw materials for FireIce® are in abundant supply. The polymers are manufactured for us by two third parties. However, there are also several other companies that are able to manufacture the polymer. The polymer becomes a gel when mixed in water. In addition, we expect to have exclusive agreements in place in the near future with our gel suppliers for its exclusive supply of product for fire suppressant purposes.
The fire suppression market is highly competitive. However, we believe that once we enter the market we will be able to compete effectively because:
·FireIce® should provide superior benefits over other fire suppressants.
·The price per gallon of FireIce® is significantly less than for our competitors' products.
·Since much less FireIce® is needed per gallon of water than our competitors' products and our product is shipped as a powder not a liquid, we anticipate the cost of shipping FireIce® to customers is also significantly lower.
·Once a fire has been extinguished, any dispensing system used to disperse FireIce® can be simply cleaned with water.
·FireIce® is different from foam. Foam consists of air bubbles in water and a small amount of surfactant. When the bubbles burst, the foam collapses. When mixed with FireIce®, water is held by a three-dimensional network of cross-linked polymers. When FireIce® is applied to the fire, the water evaporates and the liquid collapses, sapping the fire of not only heat but oxygen as well. It takes longer for water to evaporate from our polymer than for air bubbles to burst. We believe this is how FireIce® provides a more efficient protection that lasts longer than foam.
Thermo-Gel®, a product of Thermo Technologies, LLC, provides the fire fighting industry with a product that can be used for suppression, structure protection, exposure protection, defensible perimeters and wet lines. This product consists of superabsorbent polymers-polyacrylamide and sodium polyacrylate, mineral oil, and surfactants, and is supplied as a liquid concentrate which is mixed in an eductor. It does require special expensive equipment to use. Thermo-Gel® is used in fighting active fires, wildland fires, prescribed burns, urban interface fires, aviation applications, and in the protection of all types of structures from homes to commercial and industrial investments. This product has been approved by the US Forest Service. While Thermo-Gel® has market share, FireIce® is much less expensive, easier to clean up and does not require added equipment. ICL Performance Products LP produces Phos-Chek AquaGel-K and has the largest market share on the West Coast. We believe FireIce® can compete because it is less expensive, and we believe it is more effective to use. Ansul, Inc. produces Wildfire AFG, which is a large participant in the fire suppressant market and has access to substantial capital. FireIce® is less expensive and easier to use and clean up. Additionally, unlike Ansul, FireIce® does not need added equipment to use.
Barricade International, Inc. is a small, three-person company that is also marketing a liquid fire suppression gel. However, their product is an emulsion gel, which comes in a liquid form and is made from totally different materials than FireIce®. It has gained some publicity because the current owner of the company is a firefighter. We do not believe it is any real competitive threat to our FireIce® because:
·Its gel is significantly more expensive than ours.
·Even though the gel is designed to protect homes and structures, it is not designed to directly protect firefighters and other first responders as FireIce® is capable of doing.
·Unlike FireIce®, Barricade's gel only works with the device it manufactures and that must be purchased from it.
·Barricade's mixture has to be shaken every 30 to 60 days or it hardens and becomes unusable.
·Unlike FireIce®, its product is not allowed to be put into any type of firefighter equipment or pumper trucks. It hardens in a short time period, which is not conducive to the intricate pieces of firefighting equipment. Barricade claims that in a worst case scenario objects coated with their gel may have to be pressure cleaned.
·Barricade's gel is an emulsion gel, which means it is already a liquid. It must be sprayed ahead of time and allowed to cure and turn into a hardened substance with a Styrofoam type of feel.
There is no real seasonality to structural fires. These occur throughout the year. In wildland fires, FireIce® use will be more likely during the warmer, drier summer months when forest and other wildland fires are more prevalent.
Irrigation in all forms costs billions of dollars a year. According to the USDA Farm and Ranch Irrigation Survey, in 2003 farmers spent $2.6 billion on farm irrigation alone. According to a 2005 article on the World Bank's website, agricultural water management is a vital practice in ensuring food security, poverty reduction, and environmental protection. After decades of successfully expanding irrigation and improving productivity, farmers and managers face an emerging crisis in the form of poorly performing irrigation schemes, slow modernization, declining investment, constrained water availability, and environmental degradation. An article in the November 2001 edition of Golf Course News stated that the golf course irrigation industry by itself has expended millions into research and development of new products and services designed to improve efficiency, conservation and ease of operations.
Drought conditions currently exist in many parts of the United States including the West, Southwest and Southeast. These drought conditions are causing crop shortages as farmers have insufficient water for their crops which is reducing their yield. Additionally, the drought is causing an increase in forest fires in some areas.
RootGelTM is made from the family of inorganic co-polymers. Versions of this product have been used in the agricultural industry for many years. RootGelTM can absorb hundreds of times its weight in water. Water is rapidly drawn into a polymer network where it is stored. As the soil dries out, the polymer releases up to 95% of the water it has absorbed back into the soil. Therefore, the water becomes available when the plants need it most. RootGelTM is available in different particle sizes - the finer the size of the particle, the greater its absorption capacity and speed.
We are marketing two distinct versions of RootGelTM, a sprayable version and a granular one. The sprayable version is a fine particle blend that is for use on existing grass and can be applied using any type of spray rig or backpack sprayer. The granular product has been formulated to be tilled into the top four to six inches of the soil to assist in replacing and replanting of grass, including sodding and seeding, and is also recommended to be used during the planting of trees, shrubs, and annuals. The granular version is appropriate for planting situations in which the grass is not already established. We are now selling both versions to our distributors which are marketing the products to the golf course maintenance industry and the sod farm market. Because of drought conditions in Florida and elsewhere in the Southeast, we have received interest in both versions of the product.
RootGelTM degrades naturally in the soil. Sunlight and salinity exposure makes it break down faster. The RootGelTM sprayable version is our flagship product and is used as a top dressing and sprayed onto already established turf and grasses. Our formulation provides a specifically formulated particle size which, with irrigation, gets down to the roots to supply turf and grasses with water and nutrients. Since the sprayable particle size is very small and not as protected from the ultraviolet light given off by the sun as the granular form, it will be broken down much more rapidly than the granular form. The granular form of RootGelTM is tilled directly into the soil and it will last for three to five years without having to be reapplied. The market for the granular product will be newly-designed golf courses as well as courses doing replanting as part of their continual golf course maintenance. Although, granular form re-orders for large scale use may be limited due to its long duration in soil, we expect it to be used in both industrial and retail markets for the planting of landscaping which always has constant turnover due to landscaping re-design, re-planting and young tree mortality rates. Additionally, we have initiated marketing both versions of RootGelTM to the agricultural market.
RootGelTM has multiple potential uses:
·RootGelTM products are specially designed for use as a soil conditioner for water and nutrient retention in golf course maintenance, landscaping, forestry, horticulture and various other types of agricultural applications. Each product's goal is to increase the water holding capacity of soils and potting mixes, thereby reducing the frequency of irrigation, as well as the leaching of valuable nutrients.
·RootGelTM can also be beneficial for lawns and sod by improving germination and promoting regular even growth of lawns. This is especially useful for golf courses and grass in parks and gardens.
·It can be effective in agriculture, particularly in commercial farming. By storing water for later release as the soil becomes drier, RootGelTM delays wilting and makes it possible for certain plants to become better established while waiting for rain or irrigation to begin. In one test, the use of RootGelTM in rain fed sugar cane increased the yield by approximately 25%.
·By absorbing fertilizer, RootGelTM reduces the amount that runs out of the soil and makes it available to the plants for a longer period of time.
·RootGelTM can be used in the planting of trees, bushes and saplings by enhancing root development and reducing mortality rates due to transplant shock.
·RootGelTM can keep plants, trees and cut flowers hydrated and thereby facilitate their transportation over long distances.
·If RootGelTM is mixed into the soil, cuttings and transplants take root better and watering frequencies are reduced by as much as 30% to 50%.
·Another potential use of RootGelTM is for floral decoration. RootGelTM is placed in a container with colored water. RootGelTM absorbs this colored water and becomes colored. The resulting colored gel can be placed in glass containers in which cut flowers may be placed.
Sales and Marketing
Our initial marketing of RootGelTM has been aimed at the golf course market primarily in the Southeast as the recent drought created water restrictions imposed by local governments. Based upon widespread publicity, we believe that the recent drought in other parts of the United States, including the West, Southwest and Southeast, has created an opportunity to demonstrate to governments that RootGelTM can provide a solution to crop shortages. Accordingly, we have initiated marketing RootGelTM to government entities such as the V.A. Administration and ABMA (American Battle Monuments Association).
GelTech is currently working to rollout a distribution network of over 50 distributors covering 26 states, including California, New York, Texas and Florida. The industries that have gravitated to the RootGelTM line and concept have been diverse, including sod farms, tree and crop growers, lawn and landscape professionals.
We are also engaged in discussions with a few international distributors within the irrigation industry about acting as a distributor for RootGelTM to various markets. We cannot assure you we will be successful in recruiting distributors or that they will sell substantial quantities of RootGelTM at prices that are profitable.
Raw Materials and Suppliers
Currently, our RootGelTM polymer is manufactured for us by a third party. There are several other companies that are also capable of manufacturing the polymer.
Polymers have been marketed on and off for over 20 years as additions to soil to increase water retention and reduce irrigation. Numerous companies appear to have products that are very similar to RootGelTM. Some of these companies are:
·Horticultural Alliance, Inc.
·Turbo Technologies, Inc.
·American Soil Technologies, Inc. [OTCBB: SOYL]
The first two are private companies and it is unclear what financial, marketing and sales resources they have compared to us. On the other hand, American Soil Technologies, Inc. is listed on the Over-the-Counter Bulletin Board. However, from American Soil's filings with the Securities and Exchange Commission ("SEC"), it is clear that it has experienced significant losses, has a large accumulated deficit and has a working capital deficit which may hamper its ability to compete. It supplies polymer soil additions and other related products. According to its last filing with the SEC, it is now in litigation with its former polymer supplier as the result of alleged defective supplies. American Soil has an exclusive license to two method patents with cross-linked and linear polymers as their basis. They also have a patent on a slow release liquid fertilizer. American Soil also has six patents on a machine designed to install its liquid products in mature turf as well as some standing crops.
Since we do not currently have a patent on RootGelTM itself or on any of its uses, it is possible that a competitor could reverse engineer RootGelTM and market it under its own brand name. We have filed a patent application for the sprayable version of RootGelTM.
Due to the amount of polymer that we expect to use in the production of RootGelTM and our other applications such as FireIce®, we believe our pricing for RootGelTM will be superior to that of any similar products that may be offered by our competitors.
We expect RootGelTM will experience seasonality in sales during the fall and winter quarters, except in the Southern part of the United States. However, we do not expect as much seasonality in more southern areas that generally experience year round growing cycles, with the sale of the agricultural products preceding the growing cycle of various crops. We also believe a higher demand for RootGelTM will exist during the drought conditions affecting the United States including the West, Southwest and Southeast.
When the temperatures soar, the goal is to stay cool. This issue is vital to hundreds of thousands of American workers who are subject to working in high temperature conditions. A considerable amount of research has been conducted on garments for protecting individuals under hot conditions. Cooling garments were first introduced in the late 1950s to protect wearers from hostile hot environments, primarily for military and space exploration purposes. Some of the earliest work was reported in the late 1950s involving pilots who endured high temperatures due to sunlit aircraft cockpits. Further interest in cooling garments has existed because it is not always economically or practically feasible to change the surrounding environment to cause a reduction in temperature. For example, situations where cooling the environment itself is not feasible include steel mills, foundries, mines, construction jobsites and the interior of military vehicles. Cooling garments (sometimes called "microclimate air-conditioning") permit the wearer to operate in such environments that would otherwise be debilitating. These garments operate with air, cooled water, evaporation or through a process called "phase change." Today, cooling vests are used in a wide variety of civilian applications. Some current uses of cooling vests include the following:
·Firefighters, EMTs and first responders,
·HAZMAT and SWAT teams,
·The United States military,
·Construction workers, field workers and employees of utilities companies, and
IceWearTM is designed to be used as a cooling vest under a firefighter's outer protective clothing commonly known as "bunker gear," a hazmat suit or any type of protective jacket. IceWearTM lowers the core body temperature by 2-3°F, thus preventing some heat strokes and heart attacks. The cooling bags do not require electricity, batteries or refrigeration and once activated the IceWearTM vest will drop in temperature to approximately 27°F, and will slowly increase to 40°F over a one-hour period. The vest is adjustable, reusable and washable and may be disposed of in a regular trash bin. Each vest weighs approximately three pounds and contains pockets for two bags. The bags themselves contain a mixture of polymer and urea. To activate the cooling bag, the user must squeeze the bag until a popping sound is heard. The bags must then be kneaded thoroughly to insure full mixture of the product and to produce maximum cooling. Each bag is then inserted into a pocket located under each arm section of the vest and the vest is ready to use. Additionally, each cooling bag can be used separately and applied to the forehead, neck or sports related injury. Like the vests, the bags can also be disposed of in the regular trash.
In 2006, we tested IceWearTM with race car drivers and television cameramen. It has also been tested by several Florida Power and Light field employees and a number of South Florida EMTs under high temperature conditions. IceWearTM has multiple potential uses including:
·fire departments to protect their firefighters,
·laborers who work in hot conditions such as pavers and roofers,
·in the medical field any time it is necessary to keep a patient cool,
·racers, including automobile, motorcycle and motorboat, and
·anyone else who spends time in significantly elevated temperatures.
Sales and Marketing
Currently, we are four to six months away from completing our prototype of IceWearTM for the fire and rescue industry. We have not had any sales of IceWearTM, although in 2006 an early version has been shown on ESPN2 being worn by race car drivers and a television cameraman. We are currently demonstrating FireIce® to a company that sells to the United States military and are hopeful that we may retain this company to market IceWearTM to the military. A leading distributor of fire equipment has also indicated an interest in marketing IceWearTM to their accounts which include utility companies, fire departments, EMTs, and first responders. Because of our small size, we have remained focused on our two commercialized products FireIce® and RootGelTM and have not devoted any attention to IceWearTM in the last two years.
Raw Materials and Suppliers
The polymers are manufactured for us by two third parties. There are a number of other manufacturers which are available.
Currently, a third party manufactures the cooling bags for us. They have the capacity to manufacture up to 45,000 bags per day. If we lost that company as a supplier, we believe there are many other companies that could fulfill the same role.
There are four general types of cooling vests: evaporative, cold packs, phase change and active cooling.
There are numerous companies that sell the various types of cooling vests. For instance, a company called Glacier Tek, Inc. markets a type of phase change cooling vest. Similarly, a company called Arctic Heat USA also sells a phase change vest. A company called Polar Products, Inc. markets all four types of vests. Another company called Polar-Products seems to specialize in selling evaporative cooling vests. All of these companies appear to be private so it is difficult to determine what sort of financial, marketing and sales resources they have. However, it does appear that some of these companies have been in existence for a number of years and in that time have likely had greater marketing exposure than us. For instance, some of the Arctic Heat vests were used by members of the 2004 United States Olympic team. Despite this, we believe that because the IceWearTM bags do not require any prior preparation unlike the vests our competitors sell, there will be many situations in which IceWearTM will be a more attractive product.
IceWearTM is categorized as a cold pack. Even though it has similar advantages and disadvantages as other cold pack cooling products, it has a major advantage that none of the other cold packs and in fact none of the other cooling systems have -- it can be used without any prior preparation. No materials or equipment are needed to prepare or activate it. IceWearTM can be stored and used on the spot in any type of situation. IceWearTM is ideal for workers in an emergency situation where they need access to instant cooling. In addition, because the IceWearTM bags are relatively inexpensive, a supply of them could be kept on hand for prolonged use. Even though the bags are only single use, we believe the low-cost and the convenience of not having to prepare the bags by placing them in a freezer or submerging them in cold water is a distinct advantage. In many situations such preparatory steps would be very inconvenient or even totally unfeasible.
IceWearTM is seasonal and there will be greater potential use during the hotter times of the year and less use during times of moderate temperature.
Weather modification is not a new idea. Over the past several hundred years many attempts at weather control have been made. Native Americans had rituals which they believed could induce rain. The Finnish people were believed by others to be able to control all types of weather. In the early modern era, people observed that during battles the firing of cannons and other firearms often seemed to initiate precipitation. From 1962 to 1983, the United States government ran "Project Storm Fury," an attempt to weaken tropical cyclones by flying aircraft into the storms and seeding the eyewalls with silver iodide. More recently in 2005, two bills, United States Senate Bill 517 and House Bill 2995, were introduced that would allow experimental weather modification by artificial methods and would implement a national weather modification policy. To date neither bill has become law.
Weather Tech Innovations, Inc. is our subsidiary that will manage our hurricane suppression project. It has undergone only very limited testing and is not ready for true live testing in hurricanes. We need to raise between $3 to $5 million for preliminary environmental impact studies and to build the appropriate computer and radar facilities for participating universities. Another $50 to $100 million will be needed to fully test the project once the preliminaries goals have been reached and verified. We are uncertain whether we can raise this sum.
WeatherTech Innovations® uses an inorganic polymer that has physical and chemical properties that shows promise of having the ability of weakening a hurricane. GelTech's polymer has undergone intense laboratory study and limited actual field testing. The formulated polymer looks like baby powder; however each granule has the ability to absorb hundreds of times its weight in moisture and water. The product is inert and, we believe it is non-toxic.
We believe that if a jet aircraft were to deliver our polymer into the outer bank of a hurricane and then worked its way into the eye thereby cutting a pie shaped piece out of the storm, it may cause the winds and overall strength of the storm to weaken. The product would be delivered into a storm by a third party jet aircraft with specialized disbursement systems.
In early 2001, a jet dispersed a nominal amount of the product into a building thunderstorm off the coast of South Florida. The result was that the thunderstorm was removed from Doppler radar. This was verified by the Palm Beach International Airport traffic controllers and local television stations. This test was widely publicized in the West Palm Beach area. In another crude preliminary model test by a National Oceanic and Atmospheric Administration laboratory, application of adding polymer to a hurricane was able to produce a modest reduction in wind speed under laboratory conditions.
The efficacy of our product in a cloudy, rain-filled environment requires careful further study. However, the weakening of a storm by seeding with polymer seems to be related to an increased frictional load due to larger raindrops and cloud water buildup. This takes the heat out of the atmosphere and removes water mass. This cooling is "taxing" on the storm's energy and could dynamically weaken the storm. Determining when, where, how much a storm would be weakened and what effect this would have is the objective of the studies.
Our goal is to raise the money to conduct a thorough test of whether our hurricane suppression project can reduce the impact of a hurricane and determine what, if any, effect it has on the environment. If we are successful, we then must be able to market it to the federal government. We cannot assure you we will be successful.
We estimate that it will cost from $50,000,000 to $100,000,000 over four years to test our theory and product on incoming storms and to fully evaluate the results including environmental effects. We intend to form a scientific advisory and research board to further study the matter.
Raw Materials and Suppliers
The polymer for the project is provided to us by a third party. However, there are many other sources from which GelTech could obtain the polymer.
There really is no competition for a project such as ours, due to the fact that we have the only patent for "Method of Modifying Weather." As described above, there have been previous attempts at weather modification, but we are not aware of any other company that is proposing a product similar to ours.
The project would be used during hurricane season.
The use of the polymer for seeding purposes will be subject to governmental regulation. We are subject to the United Nations Convention on the Prohibition of Military or Any Other Hostile Use of Environmental Modification Techniques. The Convention was ratified by President Jimmy Carter on December 13, 1979. This Convention bans hostile weather modification. It is unclear whether deployment of our hurricane suppression project may be considered "hostile." See the risk factor beginning at page 8 of this report.
On March 3, 2005 a bill was introduced by Senator Kay Bailey Hutchison to establish a "Weather Modification Operations or Research Board." The purpose of the bill was to develop and implement a comprehensive and coordinated national weather modification policy and to establish a national cooperative federal and state program of weather modification research and development. As of the date of this filing, the bill has not been brought to a vote.
Therefore, it seems likely that that any eventual large-scale version of the project would involve some degree of government regulation and modification of the Convention referred to above.
The patents relating to the products we currently expect to market are:
·U.S. Patent No. 6,315,213 - Method of Modifying Weather; and
·U.S. Patent U.S. Serial No. 7,182,778 - Conforming Thermal Pack for IceWearTM.
The following are patents pending for products we currently expect to market:
·U.S. patent application, Serial No. 11/251,005 for IceWearTM;
·U.S. patent application, Serial No. 11/680,803 and International Patent application, Serial No. PCT/US07/63075 for FireIce®; and
·U.S. patent application, Serial No. 11/775,512 for a sprayable form of RootGelTM.
We claim trademark rights to the following marks. Federal trademark applications are on file with the United States Trademark Office:
As of the date of this report, we have nine full-time and two part-time employees. We hire independent contractors on an "as needed" basis only. We have no collective bargaining agreements with our employees. We believe that our employee relationships are satisfactory. In addition to our Chief Executive Officer and our Chief Technology Officer, we employ two other members of the Cordani family. See the discussion in the section of this report entitled "Related Person Transactions."